1QFY19 revenue of RM419.3m translated into a core PATMI of RM30.1m. We deem the results within our expectations as over RM1.8bn worth of GDV contribution is expected to be recognised in the rest of FY19 (from the Australian projects). New sales of RM215.2m were achieved in 1QFY19 while GDV launches worth RM160m were achieved. As bulk of the GDV launch targets will be carried out only in Q4 (c.RM800m), we believe the FY19 sales target set to be achievable. Unbilled sales remain healthy at RM4.1bn (2.1x cover ratio), providing earnings visibility moving forward. We introduce FY21 numbers with core PATMI at RM196.4m and maintain our HOLD call with an unchanged TP of RM0.79 based on a 70% discount to estimated RNAV of RM2.64.

Within expectations. 1QFY19 revenue of RM419.3m translated into a core PATMI of RM30.1m, accounting for 13.3% and 10.8% of HLIB and consensus full year forecasts, respectively. We deem the results within our expectations as over RM1.8bn worth of GDV contribution is expected to be recognised in the rest of FY19 (from the Australian projects).

QoQ. Revenue fell -44.3% to RM419.3m (from RM752.8m) largely due to a larger settlement of international projects (i.e. Conservatory and Aurora) and land sales which contributed in the previous quarter. However, core PATMI increased by 15.5% to RM30.1m (from RM26.1m) largely due to the absence of aggressive inventory monetisation in the previous quarter and a lower effective tax rate.

YoY. Revenue increased 45.7% from RM287.7m due to the partial settlement of international projects (i.e. Conservatory and Aurora) despite lower contributions from the domestic projects. Core PATMI increased 9.2% from RM27.6m in tandem with revenue but was slightly offset by lower contributions from JVs and associates.

More sales expected in 2HFY19. New sales of RM215.2m was achieved in 1QFY19, comprising 18% of the FY19 sales target (RM1.2bn). With regards to GDV launches, RM160m worth of launches comprised 13% of FY19 GDV launch target (RM1.2bn). As bulk of the GDV launch targets will be carried out only in 4Q (c.RM800m), we believe the FY19 sales target set to be achievable. Unbilled sales remain healthy at RM4.1bn (2.1x cover ratio), providing earnings visibility moving forward.

Outlook. For FY19, UEMS is targeting for a flat sales target of RM1.2bn, while GDV launches are targeted at RM1.2bn (+33% YoY). 33% of GDV launches are located in the Southern Region while the remaining 66% in the Central Region; bulk of the launches are priced between RM500k to RM1m and command a slightly lower margin vis-à-vis historical product mix.

Forecast. We introduce FY21 numbers with core PATMI at RM196.4m. Maintain HOLD with an unchanged TP of RM0.79 based on a 70% discount to estimated RNAV of RM2.64. We see lack of near term catalyst given the subdued sentiment for property outlook in Johor as well as potential bumpy earnings moving forward given the adoption of MFRS15 in the recognition of their overseas projects.

Source: Hong Leong Investment Bank Research - 24 May 2019